Vanderbilt Journal of Transnational Law

First Page



Beginning as early as 1959, when the Supreme Court handed down its decision in Northwestern States Portland Cement and Stockham Valves, the business community has repeatedly asked that federal legislation be enacted to restrict the scope of permissible state action in taxing corporate income. In the intervening quarter century, the only federal legislation on state corporate income tax was P.L. 86-272, which restricted the ability of states to tax a nondomiciliary company when the company's only activity in the state was the solicitation of sales. In 1983 following the Court's decision in Container Corporation of America, foreign corporations and foreign governments joined United States multinationals in the protest against worldwide application of the unitary method of apportioning corporate income for state tax purposes.

In the wake of the Container decision, opponents of worldwide unitary combination strongly urged the Reagan Administration to introduce and actively support legislation that would restrict state use of the unitary method and also to support the Container Corporation's petition for rehearing before the Supreme Court. In response to this pressure, President Reagan asked Treasury Secretary Donald Regan to convene the Worldwide Unitary Taxation Working Group. The charge given to the Working Group was to reconcile the conflicting objectives of state governments, foreign governments, and domestic and foreign multinational corporations.